Storage Auctions: Who needs a Bond?

Did you know to perform a legal mini-storage auction in California; the person doing the bid calling must have an auctioneer’s bond?  According to the Civil Code 1812.600, a person who either calls for bids or make offers for the purchase of goods at an auction is required by California law to have an auctioneer’s bond.

Many acting as auctioneers believe they can “do” the job, however, history has proven otherwise. These “auctioneers” operate with little or no regard to legal repercussions.  A person driving without a license may feel they are more than adequate to drive.  In the same manner, a non-bonded auctioneer may feel he is capable of calling an auction.  In reality, both the unlicensed driver and the non-bonded auctioneer don’t fully comprehend the perils involved conducting these illegal activities.    

Codes pursuant to California Statutes, Business, and Professions Code, Section 21700 and Title 2.95 Section 1812.600-607, are required to obtain an auction bond.  Not having an auction bond will create potential lawsuits. Even the most innocent of mistakes can result in huge losses. Cases of non-bonded auctioneers conducting auctions have increased.  Lawsuits tie up valuable time and money for the owner/stockholder/manager, of these storage sites.

In the past, not having a bond may have been overlooked.  Currently, lack of an auction bond is an open invitation to take you, the owner/manager, to court. Sadly enough, the sole responsibility falls on the storage site to prove why it acted “recklessly”, by not having a bonded auctioneer that would have recognized the error immediately.

Attempting to conduct auctions without education skills, will invariably result in catastrophe. It takes years to acquire the skills of a truly qualified and bonded auctioneer. The chances of lawsuits can be minimized dramatically by simply using the services of a professional storage auctioneer.

When choosing an auctioneer to conduct your storage auctions, make sure they have experience in selling storage units. Since the TV shows have aired, several people think they can do what the TV makes look easy. Also ask to see their bond number, liability insurance and E & O insurance policies. If you are using an auctioneer to help shield you from lawsuits, make sure they have the proper tools, paperwork, insurance and education to execute this need.

A storage auction expert will focus their attention on drawing the right crowd to insure the units are auctioned for the maximum return for your establishment.  They will under all circumstances maintain total crowd control.  If you ever had the displeasure of being engulfed in an unruly crowd, you immediately understand this alone can justify having professionals on site. By using a professional, you are assured the work will be done in a timely manner, within on budget, and above all, properly.

There is an old proverb that says, “A wise man will change”. Hopefully, this article will enlighten those “auctioneers” who are attempting to work without a bond risking potential violations.    Only those who have been trained and bonded have the ability to avoid these legal pitfalls.  It is of the utmost importance you are fully aware of the responsibility you accept by not being bonded if you are conducting your own auctions!

Written by:
John Cardoza, CAI, BAS, CES, CAGA
Owner, Storage Auction Experts

Obtaining Maximum Profits from Storage Auctions

Most people involved with the storage business would agree the most challenging part of the business is how to handle the 7 to 10 percent of tenants who don’t pay rent as agreed.

Like all areas in life, there is no one right answer for every situation.  In the storage business, they have a process designed to answer from a legal point on how to proceed.  These answers can be obtained by looking at the California Statues 21700 or you can talk to a lawyer (preferably one who belongs to the CSSA) to know the correct way to do the lien.

Assuming all the legal paperwork is accurate, now decisions must be made on how to get these non-paying units empty so they can be replaced by tenants who will pay for their unit.

Some Mangers are worried if they auction a tenant’s goods off, they will end up in court with huge lawsuits.  If the paperwork trail is followed to the letter of the law, this won’t happen.  Most people are aware that Paris Hilton had her items auctioned in November of 2005.  For whatever reason, payment between Paris and the storage site did not happen.  After the auction, she hired the best lawyer money could buy to try and get her items back.  Since all the paperwork was correct and the person conducting the auction was bonded, she was not able to get any of her property back.

Another common misconception about auctions is they don’t bring enough money and it would be better to settle with 20 percent and get the tenant out.  Occasionally this is the best method, especially after doing inventory and the contents have value only to the tenant.  However, usually it is better to your bottom line to stand firm and get 100 percent on what is owed to you.   Why would this action be better?  Let’s look at some basic math.  For example, from the thousands of units we sold over the years, three out of five units the people will pay in full.  Should these five units be $1,000.00 each, and you settle all five you would receive $1000.00.  Should the average pay, you would collect $3,000.00 from the full pay, and have two units to auction.

Using a Professional Storage Auctioneer, even after paying his commissions, you will net more than a storage manger doing their own auction.  A Professional Storage Auction Company will have more buyers and handle those unique situations that auctions can bring. Should an Attorney get involved for any reason, having a Professional Storage Auction Company on your side can be priceless. It also sends a message to your delinquent tenants you are serious about getting paid which brings in more “past due” money because of your auction date.

As a businessperson, it sometimes is confusing why a company that hires an attorney for their legal work, an accountant for their financial work, a groundskeeper for their yard work, a computer tech for their computer work and then try to do their own auction because they think it saves them money. (It doesn’t)  The bottom line is what is most important in business is to make a profit (and not get sued) and not settling just for settling sake is something everyone should reconsider.

John Cardoza, CAI, BAS, CES

Storage Auction Experts